Texas A&M Ends Donor Support for Athlete Endorsements Due to IRS Memo

Texas A&M Athletics Foundation Adapts Strategy Amid Evolving NIL Landscape

by Nouman Rasool
Texas A&M Ends Donor Support for Athlete Endorsements Due to IRS Memo

Texas A&M's athletic support foundation has declared its decision to shut down a segment dedicated to fostering donor participation in endorsement deals for Aggies athletes. This move has unveiled the intricate relationship between traditional fundraising practices and booster groups and the burgeoning trend of channeling financial benefits directly to student players.

The 12th Man Foundation, renowned for its contributions to Texas A&M's athletic programs, will continue its engagement in facilitating name, image, and likeness (NIL) activities with Aggies athletes through "unrestricted donations." However, the foundation has taken the step to discontinue the 12th Man+ Fund, a novel initiative that was launched in February.

The impetus for this decision stems from a June memo issued by the Internal Revenue Service (IRS). This memo cautioned that nonprofit "collectives" primarily established to remunerate players might not qualify for tax exemption, thereby jeopardizing the tax deductibility of contributions.

This development carries significant ramifications for the expanding arena of collectives that have emerged as pivotal platforms for athletes' NIL engagements. The potential loss of tax deductibility for donations to athletics-oriented collectives could feasibly curtail the flow of financial support.

Mission-Aligned Decision for Compliance

As an entity dedicated to fundraising for scholarships, programs, and facilities within Texas A&M's athletics, the 12th Man Foundation's decision aligns with a commitment to adherence and mission preservation.

The Foundation articulated its standpoint, emphasizing that this choice was necessary to ensure compliance and safeguard its overarching objectives. Although the 12th Man Foundation's pivot appears to curtail its explicit involvement in athlete deals, a nuanced shift in strategy is at play.

Sports business attorney Mit Winter, based in Kansas City, Missouri, elucidates that donors will now make general contributions to the foundation, which will subsequently allocate those funds towards entering NIL arrangements with athletes.

This restructuring effectively positions such initiatives as marketing expenditures for the foundation. The 12th Man+ Fund, while short-lived, stands as an innovative experiment that aimed to integrate an NIL collective into a prominent athletic booster program.

Marketed as a means for Aggies fans to directly support athletes' NIL ventures, this program garnered attention for its unique points-based system that offered perks like event tickets and parking in return for contributions.

Notably, the NCAA responded to the 12th Man+ Fund's launch with a memo reaffirming its stance that "entities acting on behalf of the institution" cannot directly remunerate athletes for NIL activities. In a landscape shaped by shifting state laws and regulatory dynamics, exemplified by the moves made by states like Texas and Arkansas, which enable increased institutional engagement in athlete NIL arrangements while safeguarding against NCAA penalties, the 12th Man Foundation's decision showcases the complex interplay between legal considerations, taxation nuances, and the evolving support mechanisms for college athletes.